RBI cuts repo rate by 25 basis points to 6 percent

The Reserve Bank of India (RBI) on Wednesday announced a reduction in the reverse repo rate by 25 basis points (bps) under the liquidity adjustment facility (LAF), bringing it down from 6.25 percent to six percent, effective immediately.

According to the ANI report, The six member monetary policy committee (MPC), headed RBI Governor Urjit Patel announced the policy in view of the moderation in price trends that have persisted long enough to warrant lower loan costs.

The RBI Governor Urjit Patel in his speech said that inflation rates have slowed to record lows and food prices have been falling. Consumer price index (CPI)-commonly referred to as retail inflation that the RBI tracks-moderated sharply to 1.54 percent in June, the lowest since the index was re-based to 2012 in a new data series.

The MPC notified that the decision has been taken giving due consideration to the current and evolving macroeconomic situation.

The decision of the MPC is consistent with a neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of four per cent within a band of two percent, while supporting growth.

However, the inflation rates have slowed to record lows and food prices have been falling.

The Consumer price index (CPI) commonly referred to as retail inflation that the RBI tracks mode rated sharply to 1.54 percent in June, the lowest since the index was re-based to 2012 in a new data series.

The apex banking system, the RBI and the government had set a retail inflation target of four percent for next five years with an upper tolerance level of six percent and lower limit of two percent.

Meanwhile, moments after the Reserve Bank of India (RBI) announced reduction in the reverse repo rate by 25 basis points (bps), volatility gripped the benchmark indices as the Sensex dipped down 106.82 points at 32468.35, while the Nifty was down 38.5 points at 10076.5.